Senate Majority Leader Harry Reid, D-Nev., said he plans procedural vote on nomination of Richard Cordray to head CFPB

Senate Energy and Natural Resources Cmte holds hearing on how U.S. gasoline, fuel prices are being affected by current boom in domestic oil production, restructuring of refining industry, distribution system, 10am

PORTUGAL, PORTUGAL, PORTUGAL

Takeaway:Portugal is posting a massive negative divergence vs the rest of the world. Sovereign CDS are going parabolic. Greece/Cypress II?

This note was originally published July 15, 2013 at 09:44 in Financials

Key Takeaways:

Portuguese sovereign swaps rose 83 bps last week to 556 bps, and are up 185 bps in the last month (+50%). Since 5/22, Portguese swaps have doubled off their lows of 274 bps. By comparison, the rest of Europe is up 7-12% MoM. It's worth asking whether Portugal is going to soon become a new hotbed of focus.

Meanwhile, the situation in the U.S. continues to improve following Bernanke's talk-down on tapering mid-last week. High yield rates fell 27.0 bps last week, ending the week at 6.31% versus 6.58% the prior week. Currently long-term rates are heading toward what we consider higher lows after recently putting in a higher high.

1. American Financial CDS - Swaps tightened for 27 out of 27 domestic financial institutions. Mortgage insurers posted sharp improvements WoW, with MTG and RDN dropping 43 and 49 bps, respectively. We've been using MI swaps as a proxy of sorts around sentiment of the rate of recovery in the housing market. After stalling out for a month or so, it's a worthwhile takeaway to see swaps again moving (aggressively) in the right direction.

Tightened the most WoW: ACE, XL, GNW

Tightened the least WoW: COF, AGO, WFC

Tightened the most WoW: MET, XL, AIG

Widened the most MoM: GS, MBI, AGO

2. European Financial CDS - Most of Europe's banking system was uneventful last week. Spanish, Portguese and some Italian banks posted noteworthy increases, however.

3. Asian Financial CDS - After seeing risk profiles steadily deteriorate for weeks, Chinese and Indian financials saw their high water mark swap quotes recede further last week. Chinese banks were down an average of 16 bps WoW, while Indian swaps came in 31 bps, on average

4. Sovereign CDS – Sovereign swaps were almost universally tighter last week, with one major exception. Portuguese swaps widened 83 bps WoW to 556. In the past month, Portuguese swaps have widened out 185 bps. This is a significant negative divergence from the rest of Europe. Is it too soon to begin asking whether Portugal is beginning to fulfill its destiny as Greece II? The data is starting to suggest that.

9. Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 12 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States. Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal. By contrast, the Euribor rate is the rate offered for unsecured interbank lending. Thus, the spread between the two isolates counterparty risk.

10. ECB Liquidity Recourse to the Deposit Facility – Deposits fell by 17 billion Euros last week. The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB. Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system. An increase in this metric shows that banks are borrowing from the ECB. In other words, the deposit facility measures one element of the ECB response to the crisis.

11. Markit MCDX Index Monitor – Last week spreads tightened 1 bp, ending the week at 95.02 bps versus 96.04 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1.

REPLAY: Q3 2013 MACRO THEMES CALL

Earlier today the Hedgeye Macro Team, led by CEO Keith McCullough, hosted their quarterly Macro Themes conference call in which they detailed their Top 3 Global Macro Investment themes for 3Q13. The Replay and Presentation Materials can be accessed via the links below.

Q3 THEMES:

1. #RatesRising: The 30Y bull cycle in bonds is over. We discuss the cross-asset class implications of the reversal and how to be positioned for the ongoing deflation of Bernanke's last (and largest) bubble.

2. #DebtDeflation: With total outstanding debt equal to three times equity, we give caution to the impact of debt deflating and offer investment vehicles to play this theme.

3. #AsianContagion: China sneezes and the rest of Asia catches the flu. #RisingRates and #StrongDollar continue to perpetuate #EmergingOutflows across the developing Asia region while a likely resurgence of positive sentiment surrounding the Abenomics agenda and continued yen weakness should help Japanese equities continue to outperform the region.

If you are having trouble accessing this replay or would like more information contact .

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07/15/13 01:08 PM EDT

FOUR FOR FOUR!

That’s a good stat for baseball but not so good when it comes to regional gaming operators missing estimates.

Estimates keep coming down yet regional gamers keep missing. Q2 should be a rerun. The following table details our EBITDA estimates. Contact us if you would like to see our models.

Note that we expect same-store EBITDA to fall for each of the four regional operators for the 2nd straight quarter. With the exception of PENN, it should be 3 quarters in a row. The economy is doing better and housing prices have improved. What’s going? We think oversupply and lack of demand are the problems. As we illustrated in our 05/17/13 note “CHART DU JOUR: ADMITTING THE PROBLEM,’ the positive macro hasn’t overcome the long-term secular headwind of a declining slot customer base.

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